Ask a vendor for a significant contract concession, and chances are you’ll hear: “We can’t do that because it would set a precedent.” As an explanation, the vendor rep will tell a customer that if he granted the customer’s concession, he would be forced to grant similar requests to other customers. The vendor justifies this requirement by referencing either a vague “doctrine of fair dealings” or obscure legal issues. The beauty of this ploy—from a vendor’s standpoint—is that it’s both powerful and ambiguous, making it a particularly hard one for customers to overcome. That’s because customers don’t have one of the following two things:
- A clue about what vendors can or can’t really do.
- Access to the information necessary to challenge the vendor’s claims that are at the heart of this ploy.
More specifically, a customer doesn’t normally have the following information:
- Whether the vendor really would have a policy or legal problem if the concession was granted in the negotiations.
- Whether the vendor has or hasn’t granted the same or a similar concession to another customer.
Because the customer doesn’t have those facts, the vendor has the upper hand in negotiations. The customer must either accept the vendor’s comments as true or tap into strategies to counter this highly effective ploy.
If you find yourself in this situation, you might first respond by showing interest in the vendor’s “problem.” Ask the vendor representative: “You mean you actually would have a precedent problem if you granted us this concession? Does your firm really take these special cases seriously? Once you’ve set a precedent, do you really have to allow other customers the same concession? Do you keep track of this sort of thing?”
The vendor rep, thinking you’re buying into his story, will usually pick up the lead and go to great lengths to explain his position, perhaps with a few references to previous precedent problems his company has experienced.
Respond by saying, “Well, if what you say is true, then we probably want many of your prior concessions, because it sounds like we’re entitled to them.” If the vendor rep responds negatively, counter with something like this: “Look, you said you keep track of this kind of thing and your company has a policy of granting prior concessions to other customers. Before we can negotiate further, we’re going to need a list of all your previous concessions so we can see which ones we want.”
At this point, the vendor may bear an expression of silent disbelief. You have now successfully countered this ploy and gained control of the negotiations. So press your advantage!
Another tactic is to indicate your intention to find out about the precedents from other sources. Simply break off the negotiations to do some digging and obtain information from other parties about the vendor’s previous concessions. The most likely sources of information about them are other customers, customer associations (such as CAUCUS), specialized publications and professional negotiators and advisers.
The mere threat to break off negotiations for this purpose often becomes an effective strategy, even if you don’t try to collect useful information. Threats of broken-down negotiations should get a vendor’s attention.
If a vendor rep insists that his company has never granted particular concessions, call his bluff and ask for a “most-favored customer” provision in the agreement. Such a provision states that if the vendor has granted any customer a better price or contractual concession during a specific period (generally beginning before the execution date of the one you’re negotiating and continuing for some stated period thereafter), then the vendor is obligated to give you the same concession. This provision can be written to apply to your entire agreement or to be tightly restricted to designated sections of the agreement.
Most major vendors have preapproved contract changes that are available if they’re needed to get a deal done. But, as always, a customer must have a strong negotiating posture. As part of that, always ask for concessions.
JOE AUER is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at email@example.com.
Copyright by Computerworld, Inc., 500 Old Connecticut Path, Framingham, MA 01701. Reprinted by permission of Computerworld.